Jeep Grand Cherokee: Its redesign boosts a Chrysler turnaround

Jeep Grand Cherokee has gotten positive media reviews, and sales of the Jeep Grand Cherokee in the third quarter were about double the pace of its predecessor. Chrysler said Monday that its profit outlook is improving.

"I'm really positive about what 2011 will bring" for Chrysler, Sergio Marchionne, the company's chief executive officer, said in a conference call to announce third-quarter results. "This is an industry that's on the mend."

Chrysler has been officially losing money as it struggles to pay back debts from a government bailout, but the size of quarterly losses has shrunk during this year. Chrysler reported a net loss of $84 million for the third quarter, down from $172 million in the year's second quarter.

Citing five-year goals laid out a year ago, Mr. Marchionne said, "After three consecutive quarters of better-than-forecasted results, we are not only living up to our commitments, but we are also exceeding our 2010 financial objectives."

One success story is Chrysler's redesigned Jeep Grand Cherokee, which he said has gotten "an incredible amount of support" from media reviews. In addition, the 2011 Ram Laramie Longhorn was named “Truck of Texas” by the Texas Auto Writers Association.

The new Grand Cherokee had sales of 23,000 units in the third quarter – about double the pace of its predecessor vehicle. The Chrysler Group's other big gainers in sales included the Ram pickup (53,000 units sold) and the Jeep Liberty and Jeep Patriot.

Despite the progress, the company still has big challenges ahead of it.

Its market share, at 9.5 percent of all US sales in October, is about half that of GM, and smaller than Ford's, Toyota's, and Honda's as well. And it will take time for the company to prove its strategy of blending US design traditions with those of European partner Fiat. Marchionne is CEO of both companies, and Chrysler survived the financial crisis because Fiat agreed to take a 20 percent stake in the Detroit firm.

Another burden on Chrysler is debt owed to a trust fund set up to pay health-care benefits to the firm's retired workers. (That trust fund also became a major owner of Chrysler's equity when the company restructured.)

One key test of Chrysler's revival looms in 2011, as Chrysler looks to make an initial public offering of stock to raise money in US capital markets.

Another test will come early in 2012, as the company starts selling a new Dodge Avenger built on a platform developed at Fiat.

Meanwhile, Chrysler is rolling out improved versions of various cars and aiming to get customers into dealerships for test drives. "We need to fight harder" to win pickup-truck customers, Marchionne acknowledged, given the longstanding dominance of Ford and GM in that area.

If Chrysler stages a full recovery in the next few years, it would mark a stunning turnaround from near collapse in 2008.

Then, America's financial crisis brought car buying nearly to a halt, as the ripple effects of a financial panic hit US consumers. GM and Chrysler were threatened with the prospect of a liquidation-style bankruptcy. In order to avoid the mass layoffs that would entail – and the added trouble that would bring for the economy – the Bush administration stepped in with a controversial bailout late that year.

In a soon-to-be-released memoir, George W. Bush describes the decision as frustrating but necessary.

"With the market not yet functioning, I had to safeguard American workers and families from widespread collapse," he writes in the book, according to The Detroit News. "I also had my successor in mind. I decided to treat him the way I would like to have been treated if I were in his position."

The move kept the carmakers alive until incoming President Obama could craft his own response to Detroit's troubles. The result was a government-assisted bankruptcy restructuring for both companies, which allowed them to lighten dangerous loads of debt. But the Obama administration told Chrysler that it had to find a partner if it wanted to get federal help to survive.

The result: Marchionne as CEO and the partial ownership by Fiat.

Marchionne used Monday's briefing to praise Chrysler's employees – describing the ranks of engineers and others as "simply outstanding." Casting them and the firm as victims of past mistakes by top management, he said, "We've been given an opportunity here to fix this house."